Facebook Inc. Makes Another Move Into Google's Mobile Ad Territory

By Markets Fool.com

When it comes to advertising on mobile devices, Google dominates, with Facebook playing second fiddle while everyone else holds market shares smaller than 4%.

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When you take out Google's mobile search ad business and focus on display advertising on websites and in apps, the picture changes significantly. Facebook holds a tremendous lead over the competition, while Google and Twitter are much closer in competition than many would think. The difference comes from Facebook's accounting for a huge percentage of time spent on mobile devices and Twitter's MoPub platform, which it bought in 2013.

But now Facebook is looking to extend its display ad dominance beyond its walls through its LiveRail acquisition. LiveRail originally specialized in video ad inventory, but Facebook announced recently that it will now extend to display ads. That's a huge shot across the bow for Google's DoubleClick and Twitter's MoPub.


Several of the new ad units: a video display ad, a native ad, an interstitial, and a banner. Source: Facebook.

Adding that Facebook touch
What separates LiveRail from Google and Twitter is that it has access to Facebook's anonymized user data. So instead of using search history or Web cookies, Facebook knows for certain that you're an 18- to 35-year-old male living in the United States and interested in finance, because you tell it.

That means publishers can sell more advertising, or charge a higher price for better targeted ads. LiveRail will help publishers determine pricing for their ad units.

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Facebook already extends its advertising to other publishers' apps through its Facebook Ad Network, but LiveRail is a supply side platform for publishers most similar to Twitter's MoPub. Publishers can monetize their app through banner ads, interstitials, and custom native ads designed to look like other content in the app. LiveRail will enable publishers to sell ads directly, to an exchange (like the Facebook Audience Network), to a demand side platform (like Facebook's Atlas), or to agency trading desks.

LiveRail's versatility and the additional targeting data from Facebook should lead to significant share gains from MoPub. However, publishers may be wary of ceding too much control to Facebook, since they often compete against it for advertising dollars. As such, some publishers may spread their ad inventory out among many platforms, but LiveRail is now a viable option.

Controlling ad-tech
Over the past couple of years, Facebook has invested heavily in ad technology, particularly in mobile. The company purchased Atlas in 2013, which it relaunched last year as a demand-side platform focused on cross-device advertising. It launched its Facebook Audience Network mobile ad exchange last year as well. And, of course, it purchased LiveRail last year.

With the extension of LiveRail to display ads, Facebook is quickly growing to challenge Google's existing ad tech. That's quite evident on mobile devices, which Facebook has made its primary focus on ad-tech. Note that LiveRail's display ad platform extends only to mobile ads for now, with no indication of when it will add desktop display units.

For its part, Google runs its own ad exchange, ad server, mobile ad network, and demand-side platform, and it's built quite an extensive customer base. Last year, the company generated nearly $14 billion from its publishing partners' ad businesses.Comparatively, Facebook generated $12.5 billion in total revenue last year, so there's a lot of money for Facebook in providing better ad tech and winning customers.

With the shift to mobile devices, Facebook is poised to leverage its advantages in the area while Google holds on to its position in desktop advertising as long as possible. It's better able to target advertisements across devices and on mobile using its user data compared to Google's intention-based (search history) data. It's better able to track its users' behavior based on social indicators. And it's poised to eventually take ad spend from Google, as more people turn to smartphones and tablets as their primary means to access the Internet and the ad dollars follow.

The article Facebook Inc. Makes Another Move Into Google's Mobile Ad Territory originally appeared on Fool.com.

Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Facebook, Google (A shares), Google (C shares), and Twitter. The Motley Fool owns shares of Facebook, Google (A shares), Google (C shares), and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.